Earnings call transcript: Havila Kystruten's Q3 2025 sees revenue growth, stock dips

Havila Kystruten posted Q3 2025 operational revenues of NOK 422 million (+13% YoY) and EBITDA of NOK 283 million, with 80% vessel occupancy and a record average cabin rate (ACR) of NOK 6,100; management raised 2025 EBITDA guidance to >NOK 400 million and reiterated a NOK 600 million EBITDA target for 2026 with 30–40% margins targeted by 2027. The company completed a EUR 56m 15‑year financial lease refinancing with the majority shareholder (maturity to 2040) that lowers blended financing costs and stabilizes debt service, and launched a full biogas voyage cutting CO2 materially; despite these positives the stock fell ~1.15% to NOK 60.80, reflecting investor caution.

Analysis

Market structure: Havila (OSE:HKY) benefits directly from a one-off contractual indexation windfall (~NOK 100m recognized) + a refinancing that cuts blended funding cost to ~10% and extends maturity to 2040, improving near-term default risk. Demand signals are constructive — occupancy ~80%, ACR NOK 6,100 and 44% of 2026 capacity already sold (>> last year by ~5ppt) — implying pricing power if bookings continue; fixed vessel supply (4 ships) amplifies upside to yields. Currency/exposure: EUR-denominated debt leaves equity sensitive to NOK/EUR moves; LNG/CO2 tax volatility remains a margin swing factor.

Risk assessment: Tail risks include loss of the government concession (binary, >50% revenue hit), reversal of the indexation adjustment, or a material incident/maintenance write-off. Short-term (days–weeks): market reaction to Q4 booking updates and any further audit findings; medium (3–12 months): attainment of 2026 targets (NOK 600m EBITDA) and covenant testing; long-term (2027+) hinge on ACR +5–10% and successful biogas rollout (target 100% bunker biogas by end-2028). Hidden dependency: a material portion of 2025 uplift is non-recurring accounting reclass/one-offs.

Trade implications: Tactical long-equity exposure to HKY is attractive given asset-backed valuation (value-adjusted equity ~NOK 3bn) and refinancing de-risking, but size for a directional book should be modest and conditional. Prefer entry in two tranches: initial 50% now, add if 2026 bookings >50% or LNG cost guidance saves ≥NOK 30m. Avoid buying unsecured debt or junior paper until EBITDA cadence is proven; consider covered-call income if liquidity supports it.

Contrarian angle: The 1.15% post-call share dip looks like an overreaction given refinancing and structural upside from ACR/cabin re-categorization; consensus may be underpricing vessel collateral and the government-index upside. Conversely, the market may be underestimating concession re-award risk and sustainability capex (biogas) timing. Historical parallels: regional ferry operators rerate once stable long-term contracts and fuel-savings materialize — but only after 2–3 quarters of consistent booking/EBITDA delivery, so the trade is time-gated.

Key Decisions for Investors

• Initiate a 2–3% portfolio long position in Havila Kystruten (OSE:HKY) at or below NOK 62 (current ~NOK 60.8). Use a two-tranche scale: 50% now, 50% added if 2026 forward bookings >50% or management confirms LNG cost savings ≥NOK 30m. Set hard stop-loss at -20% and target +35–45% by end-2026 if EBITDA momentum is visible.
• If liquid options exist, buy a 12–18 month call spread (buy 1x Jan/Dec 2026 65–75 call, sell 1x 90–100 call depending on strikes available) sized to 0.5–1% portfolio notional to capture asymmetric upside while limiting premium risk.
• Avoid purchasing or rollover of HKY unsecured/junior bonds until at least two consecutive quarters of free cash flow cover debt service (DSCR >1.2). For credit exposure, prefer notional hedges (CDS or short-equity) if covenant breach risk emerges.
• Establish a relative-value pair: long HKY (weight 1) vs short a listed regional cruise peer on Oslo Børs (weight 0.7–1.0) to isolate idiosyncratic concession/indexation upside; re-balance after concession announcement or within 90 days if dispersion tightens.
• Monitor three high-probability catalysts over next 30–90 days and act: (1) Q4 booking update — add if 2026 bookings >50% and ACR trend +10% YOY; (2) any reversal/clarification on the NOK ~100m contractual catch-up — reduce position if reversed; (3) LNG/CO2 tax moves — reduce equity if CO2 tax increases >20% y/y or LNG supply cost swings negate the expected NOK 30m saving.